Transatlantic Partnership as an ‘Economic NATO’: Will It Be a ‘Game-Changer’?

Written by | Tuesday, September 3rd, 2013
Dr. Daniel Novotny

It was in February 2013 that U.S. and EU leaders officially announced the decision to go for an ambitious and comprehensive free-trade agreement between both regions – the Transatlantic Trade and Investment Partnership (TTIP). U.S. President Barack Obama backed the idea in his State of the Union address earlier this year also “because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.” Across the Atlantic, German Chancellor Angela Merkel described a prospective free trade deal between the U.S. and the European Union as “by far the most important future project” of the 27 member states if Europe is to maintain its interests and values in a globalized world. Not to waste time, to move from words to deeds, the U.S. and EU leaders agreed to launch the negotiations of the TTIP this month (July 2013).
This comprehensive free trade agreement that would cover a zone of 800 million inhabitants is indeed an ambitious project, but concurrently its timing looks propitious. First of all, hopes for a world-wide free-trade agreement, first proposed in the Doha Round a decade ago, have all but vanished. Secondly, both American and European leaders are acutely aware that their economies need stimulus. Since neither Washington nor Brussels have enough money to fund long-term sweeping stimulus programs, growth through the reduction of trade barriers is an attractive prospect. Thirdly, promoting a trans-Atlantic free-trade agreement may allow the Obama administration to allay European concerns that the United States has turned away from the Old Continent in favor of the Asia-Pacific region. Yet, though the TTIP negotiations could serve as a signal to Europe that the U.S. is keen to strengthen their mutual economic capabilities and thus reinvigorate political momentum, it was quite telling that in his State of Union address, the U.S. President first stressed the benefits of a prospective trans-Pacific trade agreement before mentioning the trans-Atlantic deal. Still, fourthly, in light of the ongoing dramatic shift in economic and political influence that has been also demonstrated by the shrinking American share of global GDP from 50 percent in 1945 to about 18.9 percent in 2013, the United States needs Europe more than ever if it is to shape global outcomes.
According to the Vice-President Joe Biden, if this so-called “economic NATO” becomes a reality, “the fruits of success would be almost limitless.” It is widely believed that the proposed trans-Atlantic free-trade agreement would benefit both America and Europe. For example, a study by Bertelsmann Foundation, a German think tank, showed that in the scenario of abolishing both tariff and non-tariff barriers, millions of jobs would be created and the long-term real gross domestic product per capita would increase by 13.4 percent in the U.S. and by about 5 percent across the EU. According to the US Chamber of Commerce calculations, the elimination of tariffs and cumbersome regulations would generate economic growth of up to 1.5 percent on both sides of the Atlantic. Yet, despite the enthusiastic statements by the European and American leaders, wrangling over the details of the trans-Atlantic deal could prove problematic. The devil is in the details, such as the acceptable method of slaughtering beef, permissibility of genetically modified vegetables or the length of car bumpers. The key issue during the negotiations will be how to reach a consensus, a compromise that would be acceptable to an array of interest groups and powerful agrarian and industrial lobbies. The EU and U.S. negotiators will have to tackle sensitive issues that are often vital to the cultural identities of certain regions or European countries. A case in point is, for example, French President François Hollande’s lackluster support for expanded free trade when compared with the enthusiasm displayed by the German and British leaders. Ultimately, the key question will be whether the relevant authorities in the European Union and the United States will accept each other standards and regulations.
However, apart from the obvious economic and trade implications, the Transatlantic Trade and Investment Partnership could potentially have also far-reaching strategic and geopolitical repercussions. Some officials in Washington and Brussels privately admit that China’s growing economic and political might has provided an extra incentive to initiate the negotiations. A trans-Atlantic trade deal would possibly provide the EU and the U.S. with more leverage to persuade China to make concessions on many areas in the China-EU and China-U.S. relations. According to EU Trade Commissioner Karel De Gucht, without such an agreement, “we would be forced to accept Chinese standards … that’s what it’s all about.” Negotiations of the TTIP will take years to materialize but China and other major Asia player should better be closely watching and pondering whether or not – or rather to what degree – a trans-Atlantic trade deal would be the new global ‘game-changer’.

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